.
United States Court of Appeals
for the Federal Circuit
__________________________
RAYMOND E. MABUS, SECRETARY OF THE NAVY,
Appellant,
v.
GENERAL DYNAMICS C4 SYSTEMS, INC.,
Appellee.
__________________________________________________
GENERAL DYNAMICS C4 SYSTEMS, INC.,
Appellant,
v.
RAYMOND E. MABUS, SECRETARY OF THE NAVY,
Appellee.
__________________________
2009-1550, -1560
__________________________
Appeal from the Armed Services Board of Contract
Appeals in No. 54988, Administrative Judge Cheryl L.
Scott.
___________________________
Decided: February 4, 2011
___________________________
DAVID A. HARRINGTON, Senior Trial Counsel, Com-
mercial Litigation Branch, Civil Division, United States
Department of Justice, of Washington, DC, argued for
NAVY v. GENERAL DYNAMICS C4 2
Secretary of the Navy. With him on the brief were TONY
WEST, Assistant Attorney General, JEANNE E. DAVIDSON,
Director, and BRIAN M. SIMKIN, Assistant Director.
ELAINE J. GOLDBERG, Jenner & Block LLP, of Wash-
ington, DC, argued for General Dynamics C4Systems, Inc.
With her on the brief was JESSICA RING AMUNSON. Of
counsel was MATTHEW E. PRICE.
__________________________
Before RADER, Chief Judge, and NEWMAN and MOORE,
Circuit Judges.
Opinion for the court filed by Circuit Judge Moore.
Dissenting opinion filed by Circuit Judge Newman.
MOORE, Circuit Judge.
Appellant Raymond E. Mabus, Secretary of the Navy
(Navy) appeals the final judgment of the Armed Services
Board of Contract Appeals (Board) holding that General
Dynamics C4 Systems, Inc. (General Dynamics) is enti-
tled to damages. Because the Board abused its discretion
by denying the Navy’s equitable estoppel defense, we
reverse.
BACKGROUND
On September 4, 1998, the Navy entered into a con-
tract with Motorola, Inc. (Motorola) for the development
and delivery of Digital Modular Radios. A Digital Modu-
lar Radio (radio) is also called a “software radio” and
allows a single computer to interface with a number of
different radio signals that would typically each require
its own receiving device. This was an indefinite deliv-
ery/indefinite quantity (ID/IQ) contract meaning that the
Navy, after purchasing a contractual minimum, could
3 NAVY v. GENERAL DYNAMICS C4
order additional radios at the contract price. The contract
included an “Ordering Clause” that stated:
If mailed, a delivery order or task order is consid-
ered “issued” when the Government deposits the
order in the mail. Orders may be issued orally, by
facsimile, or by electronic commerce methods only
if authorized in the schedule.
J.A. 105. The schedule did not authorize electronic
transmission of orders.
The initial phase of the contract involved two contrac-
tors, Motorola and a competitor. The government issued
its initial delivery order (DO) by mail on September 8,
1998. This DO satisfied the government’s ordering obli-
gation under the contract. The contract included five
option years. Prior to exercising Option I, the Navy
performed a “down-select,” choosing Motorola. As part of
this down-select, the parties entered into a bilateral
modification that specified the criteria for the down-select
as well as anticipated quantities that the government
would require under each option. This modification also
extended the times for exercising Options I-IV. The
modification did not extend the time for exercising Option
V, so the last date for issuing any orders would be Sep-
tember 30, 2003. Prior to down-select, the Navy issued
DO2 and DO3. It is unknown whether the Navy sent
these by mail or email. On November 30, 1999, the Navy
issued DO4 via email.
As part of the down-select process, Motorola issued a
revised proposal for lower prices throughout the option
years. Motorola prevailed in the down-select and the
Navy exercised Option I on February 1, 2000. The Navy
then issued DO5 through DO7 via email.
NAVY v. GENERAL DYNAMICS C4 4
Prior to exercising Option II, the parties entered ne-
gotiations to modify the terms of the contract. The Navy
agreed to extend the higher prices of Option I through
Option II. This was advantageous to Motorola who had
been losing money on the contract and stood to lose more
under the Option II prices. Following this agreement, the
Navy exercised Option II on March 28, 2000. The Navy
then issued DO8 via email.
On September 28, 2001, General Dynamics assumed
the contract from Motorola with knowledge that it was
not profitable. Appeal of Gen. Dynamics C4 Sys., Inc.,
ASBCA No. 54988, 09-2 BCA ¶ 34150, 2009 WL 1464387
at 11 (Board Opinion). Although the Navy exercised
Option III, it did not order any radios under that option.
In 2002 and early 2003, the parties entered negotiations
and General Dynamics asked the Navy to extend Option I
pricing. The parties entered a bilateral modification on
September 27, 2002, which did not extend Option I pric-
ing, but did require the Navy to pay higher prices for
repair parts. This modification also exercised Option IV.
The Navy then issued DO15 for a number of radios via
email.
For reasons that are not entirely clear, the parties
continued to negotiate whether to extend Option I pricing
after the exercise of Option IV. In addition to extending
Option I pricing, General Dynamics also sought to delete
from the contract the “HF waveform,” an apparently
costly waveform that the Navy had not yet ordered under
the contract. No contract modification resulted from
these negotiations and the Navy ordered HF waveforms
via email as DO16. Board Opinion at 6. General Dynam-
ics was “a little shocked” that the government ordered
these HF waveforms because it believed that there was an
agreement to delete this contract term. Id. However, the
parties never executed a modification to this effect and
5 NAVY v. GENERAL DYNAMICS C4
the Navy demanded delivery of the HF waveforms stating
that “the contract, as written, remains in full force and
effect.” Id.
On September 10, 2003, the Navy exercised Option V.
Id. at 7. The Navy then issued DOs 18-20 and 22-29 via
email under the Option V pricing. On September 30,
2003, the deadline for ordering under the contract, Gen-
eral Dynamics contacted the Navy to inquire about DO21.
The Navy confirmed that it “skipped” that DO and that it
would not issue it.
General Dynamics did not want to accept DOs 18-20
and 22-29 at Option V prices. Id. Sometime in Septem-
ber or early October 2003, General Dynamics personnel
began discussing ways to avoid filling these orders. Id.
At this time, General Dynamics reviewed the contract and
determined that the Ordering Clause prohibited emailing
DOs unless authorized by the schedule and that the
accompanying schedule did not allow for email delivery of
DOs. Id. at 7-8. General Dynamics sent a letter to the
Navy on October 6, 2003, stating that General Dynamics
rejected DOs 17-20 and 22-29. The Navy responded that
it considered the DOs valid and demanded that General
Dynamics deliver. Id. at 9. General Dynamics argued
that the DOs were not valid and construed the Navy’s
demand as direction to proceed under the Changes Clause
of the contract. The Changes Clause requires a contractor
to go forward with work even if it disputes the propriety
of the Navy’s request. Id. at 3-4.
Following the Navy’s demand for performance, Gen-
eral Dynamics filed a claim with the contracting officer.
The contracting officer denied this claim. General Dy-
namics appealed to the Board. The Board ruled that the
Navy failed to send the disputed DOs in strict compliance
with the contract, and they were thus invalid. The Board
NAVY v. GENERAL DYNAMICS C4 6
further rejected the Navy’s arguments regarding waiver
and estoppel. The Navy appeals; we have jurisdiction
under 28 U.S.C. § 1295(a)(10).
DISCUSSION
We review the Board’s legal determinations de novo.
England v. Sherman R. Smoot Corp., 388 F.3d 844, 848
(Fed. Cir. 2004). We will not set aside a factual determi-
nation of the Board “unless the decision is fraudulent, or
arbitrary, or capricious, or so grossly erroneous as to
necessarily imply bad faith, or if such decision is not
supported by substantial evidence.” 41 U.S.C. § 609(b).
We review the Board’s determination on equitable estop-
pel for abuse of discretion. A.C. Aukerman Co. v. R.L.
Chaides Constr. Co., 960 F.2d 1020, 1028 (Fed. Cir. 1992)
(en banc).
Equitable estoppel requires:
(1) misleading conduct, which may include not
only statements and actions but silence and inac-
tion, leading another to reasonably infer that
rights will not be asserted against it; (2) reliance
upon this conduct; and (3) due to this reliance,
material prejudice if the delayed assertion of such
rights is permitted.
Lincoln Logs Ltd. v. Lincoln Pre-Cut Log Homes, Inc., 971
F.2d 732, 734 (Fed. Cir. 1992) (citing Aukerman, 960 F.2d
at 1028).
The Board analyzed estoppel under a different stan-
dard. Specifically, it determined that equitable estoppel
requires that: “(1) [General Dynamics] knew the facts; (2)
it intended that its conduct be acted upon or acted such
that the Navy had a right to believe it was so intended; (3)
the Navy was ignorant of the true facts; and (4) the Navy
relied upon appellant’s conduct to its injury,” citing Rel-
7 NAVY v. GENERAL DYNAMICS C4
Reeves, Inc. v. United States, 534 F.2d 274, 296-97 (Ct. Cl.
1976). It held that the Navy could not establish element
(1), that General Dynamics knew the facts. Board Opin-
ion at 15. Specifically, it held that the Navy could not
establish that General Dynamics appreciated the con-
tract’s restrictions regarding email delivery during the
term of the contract. It also determined that because the
Navy is charged with knowing the contents of its con-
tracts, it could not establish element (3), that the Navy
was ignorant of the email prohibition. Based on the
failure to establish these elements, the Board rejected the
Navy’s estoppel defense.
The Navy argues that the Board based its analysis on
the wrong standard, and under the proper test, we should
reverse. Regarding the first factor, it argues that General
Dynamics misled it by filling orders for years before
rejecting them based on the Ordering Clause. Regarding
the second factor, the Navy argues that it clearly relied on
General Dynamics’ conduct by continuing to send DOs via
email throughout the life of the contract. The Navy
asserts that if General Dynamics had notified it earlier,
before the end of the contract, then it could have re-issued
the orders in paper form. Regarding the third element, it
argues that it was materially prejudiced because it could
not obtain the radios under the contractually negotiated
Option V pricing.
General Dynamics does not dispute that the estoppel
standard from Aukerman applies. Instead, General
Dynamics argues that the Board’s error is harmless
because the analysis is essentially identical. It argues
that the Board made factual findings regarding each of
the equitable estoppel elements even without considering
the proper test.
NAVY v. GENERAL DYNAMICS C4 8
Regarding the first factor, General Dynamics argues
that it did not engage in misleading conduct. Specifically,
it argues that before exercising Option V, the Navy had
always entered bilateral negotiations prior to exercising
any option. It argues that the disputed DOs came by
“unilateral command” of the Navy rather than after
bilateral negotiations. It argues that this makes the
disputed DOs distinct from the prior emailed DOs and
that General Dynamics was thus justified in enforcing the
strict letter of the contract. Further, it argues that it was
not misleading to notify the Navy after the deadline for
ordering because ten of the eleven disputed DOs arrived
in the final 48 hours of the contract. It also argues that
the Navy could not reasonably infer that General Dynam-
ics would not assert its rights under the contract. Specifi-
cally, it points to the fact that the Navy made these orders
under the lowest prices of the contract and that these
orders came just after General Dynamics had attempted
to avoid delivering the HF waveforms. It argues that the
Navy “issued emailed delivery orders at its peril.” Appel-
lee’s Br. 52.
Regarding the second factor, General Dynamics ar-
gues that the Navy did not rely on its conduct. It argues
that the Navy’s representatives admitted that they email
DOs as a matter of course and that this was command
practice. Further, General Dynamics points to an admis-
sion by the Navy that “General Dynamics didn’t have
anything to do with the decision . . . to issue Delivery
Orders by e-mail.” J.A. 1289-90. Finally, General Dy-
namics argues that the Navy has not changed this prac-
tice since the end of this case. It argues that all of this
shows that, regardless of General Dynamics’ conduct, the
Navy would have issued email orders.
Regarding the third factor, General Dynamics argues
that the Navy did not suffer material prejudice. It argues
9 NAVY v. GENERAL DYNAMICS C4
that the Navy was “aggressive” in asserting its rights
under the contract and, by exercising Option V, it was
asking General Dynamics to take a huge loss. It also
argues that the Navy improperly requested HF wave-
forms. It argues that the Navy did not order the number
of radios expected early in the contract and attempted to
exploit the much lower prices at the end of the option
years.
As an initial matter, we agree with both parties that
the Board failed to analyze estoppel under the correct
legal test, the equitable estoppel test set forth in Auker-
man. In light of the undisputed facts, applying the proper
test for equitable estoppel, we reverse the Board.
Regarding the first factor, we agree with the Navy
that General Dynamics’ conduct was misleading. The
Navy issued 28 DOs over the course of the contract. The
first three of these DOs were issued by mail or by un-
known means. The remaining DOs were all sent by
email. General Dynamics performed on thirteen of these
emailed DOs with no objection. 1 The contractor only
objected to the final Option V DOs numbered 17-20 and
22-29. 2 The Board noted that General Dynamics contin-
ued to accept orders because it “wanted to continue to
work with the Navy to make the state-of-the-art [radios].”
Board Opinion at 15. This acceptance of email orders was
misleading in light of General Dynamics’ later change in
course when it refused to accept the final disputed DOs.
1 The contractor performed on emailed DO4
through DO16. There was a dispute regarding DO16, but
it related to the HF waveform, not the method of delivery.
2 DO17 is not part of this action. Appellant’s Br. 4.
The remaining eleven DOs numbered 18-20 and 22-29 are
the subject of this dispute.
NAVY v. GENERAL DYNAMICS C4 10
To the extent that the Board held that equitable es-
toppel could not apply because the Navy could not estab-
lish that General Dynamics knew the content of the
contract (in particular that General Dynamics knew of the
contract’s restrictions on email), Board Opinion at 15, the
Board misapplied the law and therefore abused its discre-
tion. The knowledge at issue is not General Dynamics’
actual knowledge of the contract terms, but rather its
knowledge that it was accepting emailed delivery orders.
See Advanced Materials, Inc. v. Perry, 108 F.3d 307, 311-
12 (Fed. Cir. 1997) (holding that to estop the government
from refusing to pay for an overrun, the government must
know of the overrun, accordingly, knowledge of the con-
tract as it pertained to treatment of overruns was not the
focus of the knowledge required). It is undisputed that in
this case General Dynamics was aware that it accepted
and fulfilled delivery orders which it received via email.
General Dynamics argues that because the Navy re-
fused to renegotiate the contract prior to exercising Op-
tion V, we should ignore its earlier acceptance of the
emailed orders. There is, however, no record evidence to
support General Dynamics’ suggestion that it accepted
DOs via email because of the negotiations or contract
modifications. General Dynamics does not even suggest
that the subject of emailing DOs was ever discussed in
any of the negotiations. In fact, following Option IV, the
Navy refused to modify the contract and ordered HF
waveforms via email, DO16, and General Dynamics
fulfilled that order. In the course of performance between
the parties, emailing DOs and performance in accordance
with those DOs was standard practice. The Navy had no
obligation to renegotiate Option V or to offer to pay higher
prices. As the Board found, General Dynamics assumed
this contract with the knowledge that it was not a profit-
able contract. Board Opinion at 11. The undisputed facts
11 NAVY v. GENERAL DYNAMICS C4
of record support only one possible inference – that the
contractor accepted emailed DOs.
Regarding the second factor, reliance, the Navy
clearly relied on General Dynamics’ conduct. It issued
orders throughout the life of the contract via email. The
contractor never rejected emailed DOs or even mentioned
the Ordering Clause mailing requirement. Had the Navy
known of General Dynamics’ intention to reject these final
orders, it could have placed hardcopy orders in the mail.
This would have satisfied the now-asserted Ordering
Clause and avoided this dispute. General Dynamics
argues that because email ordering was the Navy’s stan-
dard practice, it would not have changed its behavior even
if General Dynamics had asserted the Ordering Clause
earlier. This is an absurd assumption; while email order-
ing may be the Navy’s standard practice, there is nothing
that prevents the Navy from issuing hardcopy orders
when the contract requires. It is true that the Navy
continues to email orders under other contracts, but
General Dynamics failed to show that the Navy persists
in sending email orders when the contract prohibits the
practice and the contractor objects. General Dynamics
failed to produce any evidence to show that in the circum-
stances of this contract, the Navy did not rely on its
consistent acceptance of emailed DOs. All of General
Dynamics’ evidence goes to unrelated contracts where
there is no evidence that the contractor objected to email
orders. Because General Dynamics failed to produce any
evidence to rebut the Navy’s evidence of reliance, we hold
that the Navy satisfies this element of estoppel as a
matter of law.
To the extent that the Board held that the govern-
ment could not establish equitable estoppel because the
Navy cannot show that it was ignorant of the email
prohibition in the contract, it erred as a matter of law and
NAVY v. GENERAL DYNAMICS C4 12
thus abused its discretion. Again, the Board focused on
knowledge of the wrong thing. The issue is not whether
the government had knowledge that the contract, as
written, had a prohibition against email, but rather
whether the government was aware that General Dynam-
ics intended to refuse future delivery orders if they were
sent via email. The government would not be able to rely
on General Dynamics’ prior acceptance of emailed deliv-
ery orders if it was aware that General Dynamics in-
tended to change that course of conduct. See Advanced
Materials, 108 F.3d at 312 (stating that the party assert-
ing estoppel “must not be aware of the true facts, i.e., that
no implied funding of the overrun was intended” – not
focusing on what the party asserting estoppel knew about
the contract requirement). Given that General Dynamics
did not decide to refuse to accept email delivery orders
until after the expiration of the ordering period, there was
no way in which the government could have known that
this was General Dynamics’ intent. See Board Opinion
FF 29, 47, 54; Board Opinion at 15. The government
could not have known these “true facts.” Based upon the
undisputed facts, the government’s reliance on General
Dynamics’ consistent course of conduct – acceptance of
emailed delivery orders – is established.
Regarding the final factor, it is clear that the Navy
suffered material prejudice due to General Dynamics’
delayed assertion of its rights under the Ordering Clause.
This prejudice is the Navy’s inability to obtain radios
under its contractually negotiated pricing. General
Dynamics arguments are irrelevant to the issue of preju-
dice focusing only on the Navy’s “aggressive” conduct
during the course of the contract. Even if General Dy-
namics’ characterization is accurate, which we do not
conclude, all of the alleged “aggressive” conduct was
allowed under the contract terms; contract terms that
13 NAVY v. GENERAL DYNAMICS C4
General Dynamics accepted when it assumed the contract
with knowledge that it was not profitable. Board Opinion
at 11.
The government has satisfied the elements of our test
for equitable estoppel. We hold that the Board abused its
discretion in determining that General Dynamics was not
equitably estopped from rejecting the disputed DOs based
on the Ordering Clause. The Navy simply exercised its
rights under the ID/IQ contract to order under Option V.
While we understand that these terms were not advanta-
geous to General Dynamics, they were the terms of the
contract voluntarily assumed by General Dynamics. We
refuse to allow General Dynamics out of this bargain
based on the Ordering Clause that General Dynamics
consistently ignored.
As an alternative basis for affirmance, General Dy-
namics argues that the doctrine of equitable estoppel
should not apply to ID/IQ contracts where the Navy failed
to make orders in exact accordance with the language of
the contract. General Dynamics argues that, under
Dynamics Corp. of America v. United States, 389 F.2d
424, 430 (Ct. Cl. 1968), issuance of a delivery order in an
ID/IQ contract is equivalent to exercising an option. It
argues that “it is hornbook law” that a party must exer-
cise an option in exact accord with the contract terms.
Appellee’s Br. 28. It argues that, by emailing the orders,
the Navy failed to meet the strict letter of the contract.
General Dynamics claims that these delivery orders were
equivalent to an option exercise, and as such, each stood
on its own as a counteroffer to the original contract that
General Dynamics was free to accept or reject. It argues
that while it accepted the first sixteen orders, it was free
to reject the final twelve. It argues that to apply estoppel
would violate this well-founded principle of contract law.
NAVY v. GENERAL DYNAMICS C4 14
The Navy responds that, while General Dynamics’
statement of law regarding ID/IQ contracts may be cor-
rect, it need not preclude the application of the doctrine of
equitable estoppel to this contract. It argues that, to the
extent the orders were counteroffers, General Dynamics
accepted the terms by delivering on the first emailed DO.
Further, the Navy argues that we should not accept this
argument because the delivery orders, while not in com-
pliance with the Ordering Clause, were fully consistent
with all other portions of the contract and “did not alter
the contract price, made no change to delivery terms, and
did not exceed permissible quantities.” Appellant’s Reply
Br. 15.
We agree with the Navy that the doctrine of equitable
estoppel may apply to an ID/IQ contract. While General
Dynamics is generally correct regarding the law of option
contracts, this does not preclude the application of this
equitable doctrine. Although the contractor may have
been free to reject the first emailed DO based on the
Navy’s failure to comply with the Ordering Clause, it
chose to fill that order and at least twelve more. We hold
that this course of conduct estopped General Dynamics in
the context of this ID/IQ contract. We see no reason to
exempt this contract from generally applicable equitable
doctrines. 3
REVERSED
3 Because we hold that the Navy prevails on the de-
fense of equitable estoppel, we need not reach its alterna-
tive basis of waiver.
United States Court of Appeals
for the Federal Circuit
__________________________
RAYMOND E. MABUS, SECRETARY OF THE NAVY,
Appellant,
v.
GENERAL DYNAMICS C4 SYSTEMS, INC.,
Appellee.
__________________________________________________
GENERAL DYNAMICS C4 SYSTEMS, INC.,
Appellant,
v.
RAYMOND E. MABUS, SECRETARY OF THE NAVY,
Appellee.
__________________________
2009-1550,-1560
__________________________
Appeal from the Armed Services Board of Contract Ap-
peals in No. 54988, Administrative Judge Cheryl L. Scott.
__________________________
NEWMAN, Circuit Judge, dissenting.
In this contract between General Dynamics and the
Navy’s Space and Naval Warfare Systems Command, the
Armed Services Board of Contract Appeals sustained the
right of General Dynamics to refuse eleven Delivery Orders,
NAVY v. GENERAL DYNAMICS C4 2
because the orders were not in accordance with the con-
tract’s requirement for written and signed orders placed in
the mail. Seven of the Orders were placed one day before
the end of the last option period, and three were placed on
the last day of the last option period. J.A. 288-89. The
Board held that General Dynamics has the legal right to
rely on the contract terms for Delivery Orders, had not
waived that right, and was not estopped from exercising
that right. 1 My colleagues on this panel overturn the
Board’s holding and excuse the Navy’s admitted non-
compliance with the contract ordering terms, even as the
Navy required General Dynamics to comply with all of the
concededly non-complying Delivery Orders.
I respectfully dissent.
DISCUSSION
The contract includes several clauses directed to how
ordering is required to be done. The Ordering Clause in-
cludes the following condition for electronic commerce
methods:
(c) If mailed, a delivery order or task order is con-
sidered ‘issued’ when the Government deposits the
order in the mail. Orders may be issued orally, by
facsimile, or by electronic commerce methods only if
authorized in the Schedule.
Ordering Clause, J.A. 105 (citing FAR 52.216-18 (1995))
(emphases added). The Schedule for this contract did not
1 Appeal of General Dynamics C4 Sys., Inc., ASBCA
No. 54988, 09-2 BCA ¶ 34150, 2009 WL 1464387 (A.S.B.C.A.
May 8, 2009) (Board Op.).
3 NAVY v. GENERAL DYNAMICS C4
authorize electronic commerce methods. The contract
requires that the Ordering Clause be followed:
(b) Delivery or performance shall be made only as
authorized by orders issued in accordance with the
Ordering clause.
FAR Clauses, J.A. 101, incorporating by reference FAR
52.216-22 (1995). The contract provides that exercise of the
contract options to produce and deliver specified items must
be written, and signed by the Contracting Officer:
(a) The Government may exercise options in whole
or in part any time during the option periods set
forth herein to require the Contractor to produce
and deliver hardware items or provide services
specified in the contract. . . . These options shall be
exercised if at all by written notice signed by the
Contracting Officer, transmitted to the contractor at
any time during the option exercise period . . . .
Contract Clause H-5, J.A. 81 (emphasis added).
The Board found that General Dynamics was not es-
topped from relying on these contract provisions and refus-
ing to accept these Delivery Orders, although General
Dynamics had previously accepted electronic orders. The
Board found the undisputed fact that electronic commerce
methods were not authorized in the contract Schedule.
Board Op. at 3, Finding of Fact (FF) 14. The Board found
that the parties never discussed changing the requirements
of the Ordering Clause, id., FF 13, although there were
many formal contract “modifications.” During performance,
modifications were made to various aspects of the contract,
but not to these clauses. All of the modifications stated that
other provisions “remain[ ] unchanged and in full force and
NAVY v. GENERAL DYNAMICS C4 4
effect.” Id., FF 13 (internal quotation marks omitted). The
Board held the parties to the terms of their contract; this
court now holds otherwise.
The Board’s ruling is fully supported by the law of con-
tracts, by precedent for government contracts, by the
Board’s findings of fact and conclusions of law, and by the
standard of judicial review under the Contract Disputes Act.
Nonetheless this court, breaking new ground in govern-
ment/contractor relationships, reverses the Board and holds
that General Dynamics is equitably estopped from invoking
the contract’s ordering provisions.
When an appellate court overturns a decision of a Board
of Contract Appeals, there must be sound ground to override
that decision, in law or in equity. The Contract Disputes
Act sets the standard for review of factual findings:
notwithstanding any contract provision, regulation,
or rules of law to the contrary, the decision of the
agency board on any question of law shall not be fi-
nal or conclusive, but the decision on any question
of fact shall be final and conclusive and shall not be
set aside unless the decision is fraudulent, or arbi-
trary, or capricious, or so grossly erroneous as to
necessarily imply bad faith, or if such decision is not
supported by substantial evidence.
41 U.S.C. §609(b); see generally Erickson Air Crane Co. of
Wash., Inc. v. United States, 731 F.2d 810, 814 (Fed. Cir.
1984) (“This court has a very limited review of boards of
contract appeals.”).
The panel majority now redesignates some critical find-
ings of fact as rulings of law, and thereby finds that the
Board “abused” its discretion as a matter of law. The issue
5 NAVY v. GENERAL DYNAMICS C4
of equitable estoppel is an equitable determination, based
on underlying findings of fact. Findings as to what was
“believed,” “known,” “intended,” “aware,” “implied,” and
“relied on,” are surely relevant to equity, but they are quin-
tessential questions of fact, not matters of law. No party
argued otherwise. Nonetheless, the court now rules that the
Board abused its discretion, stating that the Board’s find-
ings of fact are really rulings of law and thus subject to de
novo determination by this court. Maj. Op. at 9-13.
My colleagues do not discuss the evidence supporting
the Board’s findings of fact as to the parties’ understanding
and intent and reliance. This departure from the standards
of appellate review does not add stability to the Contract
Disputes Act, and ignores our own admonition that “the
court should stay its hand even though it might, as an
original proposition, have reached a different conclusion as
to the proper administration and application of the pro-
curement regulations.” Honeywell, Inc. v. United States,
870 F.2d 644, 648 (Fed. Cir. 1989) (quoting M. Steinthal &
Co. v. Seamans, 455 F.2d 1289, 1301 (D.C. Cir. 1971)).
The Navy does not dispute that this contract requires
that orders be in writing and signed by the contracting
officer, and that electronic ordering is forbidden. Ten of the
eleven rejected Delivery Orders were placed by email 0-1
day before contract expiration. Precedent is clear that when
the contract is explicit as to the ordering terms, these terms
are material. And precedent clearly demonstrates that the
government requires rigorous adherence to contract terms,
and that the Board and the courts have generally declined
to provide equitable relief from explicit contract provisions.
The application of this rule to contracts with the govern-
ment is reflected in the understanding that contracts with
the government can be changed only by formal “modifica-
tion.”
NAVY v. GENERAL DYNAMICS C4 6
The Board made eighty findings of fact, sixty-two of
which relate to the Board’s decision that General Dynamics
was not estopped from invoking the contract requirement
that Delivery Orders must be in writing and signed. Thus
the Board held the Navy to the terms of this contract. “A
long line of our precedent has established that agreed-upon
contract terms must be enforced,” reflecting “the general
rule of contract law that contracting parties must be held to
their agreements.” Madigan v. Hobin Lumber Co., 986 F.2d
1401, 1403, 1404 (Fed. Cir. 1993) (rejecting contractor pleas
for mitigation or other departures from the contract terms)
(citing Seaboard Lumber Co. v. United States, 903 F.2d
1560, 1564-65 (Fed. Cir. 1990) (enforcing contractual waiver
of both Article III and Seventh Amendment rights); Do-Well
Mach. Shop, Inc. v. United States, 870 F.2d 637, 640-41
(Fed. Cir. 1989) (enforcing contractual agreement of a
limitations period for presenting a termination claim);
McCall v. United States Postal Serv., 839 F.2d 664, 667
(Fed. Cir. 1988) (enforcing contractual waiver of right to
appeal because “choice was knowing and voluntary”);
Broome Constr., Inc. v. United States, 492 F.2d 829, 834 (Ct.
Cl. 1974) (“The court must enforce a mutually agreed-upon
contract according to its terms.”); Aragona Constr. Co. v.
United States, 165 Ct. Cl. 382, 390 (1964) (enforcing con-
tractual provision requiring the contractor to comply with
change orders of the contracting officer)).
In Appeal of Mach II, ASBCA No. 56630, 10-1 BCA
34357, 2010 WL 292734 (A.S.B.C.A. Jan. 12, 2010) the
contractor sought to invoke equitable estoppel or waiver to
obtain payment for an order fulfilled despite the absence of
the contracting officer’s signature, for the contractor had
filled such unsigned orders in the past. Applying precedent,
the Board held that the ordering clause required a signed
order, and that although the contractor had been told that
the contracting officer would “return a signed order,” this
7 NAVY v. GENERAL DYNAMICS C4
was not done, and the government was held not liable for
payment. Cf. Heath Constr., Inc., B-403417, 2010 WL
3491945 (Comp. Gen. Sep. 1, 2010) (rejecting the bidder’s
protest following a denial of its bid because although the
bidder sent its bid by facsimile after the contract specialist
informed the bidder that submitting bids by facsimile was
acceptable and provided the bidder instructions on how to
do so, the government’s invitation for bids did not authorize
bids to be submitted by facsimile).
The Board observed that: “The Navy has not directed us
to any case in which waiver or estoppel has been applied in
the event of an improper option exercise or improper issu-
ance of a DO under an IDIQ contract that the contractor
protested prior to performance.” Board Op. at 14. Nor has
the Navy offered any such case to this court. The court
nonetheless finds that the government was not “aware” that
General Dynamics intended to refuse the disputed Delivery
Orders, and holds that the Board abused its discretion in
refusing to permit the Navy to violate the contract based on
ignorance of its terms. My colleagues thus depart from the
proper standard of review, as well as from precedent. Both
sides to a contract are charged with knowledge of their
contract’s terms. This is essential in contracts with the
government, lest the procurement system fall into disarray.
See generally Maxima Corp. v. United States, 847 F.2d
1549, 1556 (Fed. Cir. 1988) (“Neither the contractor nor the
government can avoid its legal responsibilities by asserting
ignorance [of the contract terms].”). And although the Navy
faults General Dynamics for not attempting to change this
contract term, Appellant’s Br. at 18-19, this is a curious
argument, for it is not clear why a contractor must act to
change a provision that is for its benefit.
The Board reviewed the specific circumstances of this
contract, in explaining its reasoning for holding the Navy to
NAVY v. GENERAL DYNAMICS C4 8
the contract terms. The Board determined that the “lack of
negotiations prior to electronic ordering is material in
distinguishing the DOs at issue from the DOs pointed to by
the government as evidence of the parties’ past conduct.”
Board Op. at 15 (citing FF 40, 49). My colleagues do not
comment on the Board’s reasoning and findings. Instead,
my colleagues criticize the Board for applying government
procurement law and precedent to determine the question of
estoppel on the facts of this case, my colleagues holding that
patent infringement law and precedent of estoppel apply.
The Board applied Rel-Reeves, Inc. v. United States, 534
F.2d 274, 296-97 (Ct. Cl. 1976) and other government con-
tract precedent, which analyze equitable estoppel under a
four-part standard. As applied herein by the Board, the
four predicate inquiries for equitable estoppel are: “(1)
[General Dynamics] knew the facts; (2) it intended that its
conduct be acted upon or acted such that the Navy had a
right to believe it was so intended; (3) the Navy was igno-
rant of the true facts; and (4) the Navy relied upon [General
Dynamics’] conduct to its injury.” Board Op. at 15. Prece-
dent illustrates the acceptance of this four-part analysis.
E.g., Advanced Materials, Inc. v. Perry, 108 F.3d 307, 311
(Fed. Cir. 1997) (“This court has set forth a four element
test to establish an estoppel claim in this situation.”) (hold-
ing that the government was not estopped from relying on a
provision requiring timely written notice, despite oral notice
and the contracting officers’ written assurances); JANA, Inc.
v. United States, 936 F.2d 1265, 1270 (Fed. Cir. 1991) (citing
the four-part test, and holding that the government was not
estopped to assert overpayments against contractor); Am.
Elec. Labs., Inc. v. United States, 774 F.2d 1110, 1113 (Fed.
Cir. 1985) (“Four elements must be present to establish an
estoppel . . . .”); Hughes Aircraft Corp. v. United States,
ASBCA No. 24601, 83-1 BCA ¶ 16,396, 1983 WL 7542
(A.S.B.C.A. Mar. 4, 1983); Emeco Indus., Inc. v. United
9 NAVY v. GENERAL DYNAMICS C4
States, 485 F.2d 652, 657 (Ct. Cl. 1973); United States v.
Georgia-Pacific Co., 421 F.2d 92, 96 (9th Cir. 1970).
My colleagues fault the Board for analyzing equitable
estoppel under this established four-part test, and rule that
“a different standard” applies, namely, the three-part test
stated in A.C. Aukerman Co. v. R.L. Chaides Construction
Co., 960 F.2d 1020 (Fed. Cir. 1992) (en banc). Maj. Op. at 6.
Aukerman was a patent infringement suit between private
parties, where this court considered which factual issues are
relevant to whether a patentee is estopped from filing suit,
after threatening infringement and then remaining silent
for a time. The court in Aukerman was concerned with
straightening out some conflicting precedent that “confus-
ingly intertwines the elements of laches and equitable
estoppel.” Aukerman, 960 F.2d at 1042. 2 The court was not
concerned with contract law or any contract provision, but
with threats of litigation. Despite these differences, com-
mentary has noted only a semantic difference between the
three-part and four-part standards for equitable estoppel.
See Dan B. Dobbs, Law of Remedies 85 & n.6 (2d ed. 1993)
(explaining that lack of knowledge of the true facts by the
party invoking estoppel is covered by reliance).
Aukerman has not been viewed as announcing a new
general standard for equitable estoppel in all areas of fact
and law, negating precedent discussing estoppel in govern-
2 The Aukerman decision overruled the holding in
Jamesbury Corp. v. Litton Industrial Products, Inc., 839
F.2d 1544 (Fed. Cir. 1988) that equitable estoppel required
“(1) unreasonable and inexcusable delay in filing suit, (2)
prejudice to the infringer, (3) affirmative conduct by the
patentee inducing the belief that it abandoned its claims
against the alleged infringer, and (4) detrimental reliance
by the infringer,” id. at 1553-54, for that holding confused
laches with estoppel.
NAVY v. GENERAL DYNAMICS C4 10
ment procurement. See, e.g., John Cibinc, Jr., Ralph C.
Nash, Jr. & James F. Nagle, Administration of Government
Contracts 65-66 (4th ed. 2006) (reciting four-part standard);
1 John Cosgrove McBridge & Thomas J. Touhey, Govern-
ment Contracts: Law, Administration, Procedure
§4.100[1][b] (Walter A.I. Wilson, ed., Release No. 445 2010)
(same). This court similarly did not proclaim otherwise,
until today. Today the court holds that the application of
the Aukerman estoppel criteria leads to a different result,
imposing estoppel on General Dynamics and prohibiting it
from relying on the contract provision governing the place-
ment of Delivery Orders. Maj. Op. at 9.
There are differences between estoppel arising from
written contract terms, and estoppel arising from threats of
patent infringement. Estoppel is a doctrine of equity, with
“[m]orality and justice” as its foundation. Harvey Radio
Labs., Inc. v. United States, 115 F. Supp. 444, 449 (Ct. Cl.
1953). This court recognized in Aukerman that the estoppel
doctrine “is not limited to a particular factual situation nor
subject to resolution by simple or hard and fast rules.”
Aukerman, 960 F.2d at 1041. Nonetheless, the court now
announces that Aukerman provides the “proper test for
equitable estoppel” in procurement law. Maj. Op. at 9.
Thus my colleagues rule that the Board erred in law, in
holding that the four-part standard of Rel-Reeves applies, id.
(“[T]he Board failed to analyze estoppel under the correct
legal test . . . .”), and on this rationale my colleagues reject
the Board’s findings of fact. For example, the court now
holds that the factual elements of knowledge and reliance do
not require that General Dynamics knew the facts, and
holds that the Navy is entitled to estoppel as long as it was
not “aware that General Dynamics intended to refuse future
delivery orders if they were sent via email.” Id. at 10, 12.
My colleagues reject—calling it a matter of law—the Board’s
ruling that the Navy is charged with knowledge of its con-
11 NAVY v. GENERAL DYNAMICS C4
tract. Instead, the court holds—calling it a matter of law—
that the contractor cannot rely on the contract Delivery
Order provision unless it had informed the government, in
advance, that it will rely on this provision. Id. at 10 (“The
knowledge at issue is not General Dynamics’ actual knowl-
edge of the contract terms, but rather its knowledge that it
was accepting emailed delivery orders.”); id. at 12 (“The
issue is not whether the government had knowledge that
the contract, as written, had a prohibition against email,
but rather whether the government was aware that General
Dynamics intended to refuse future delivery orders if they
were sent via email.”). These irregular holdings that the
government need not know the content of its contracts and
the contractor cannot rely on a provision that is for its
benefit, do not impart stability to government contracting.
The Navy argues that General Dynamics behaved mis-
leadingly by failing to object to the Navy’s violation of the
prohibition on electronic communication. However, the
Board found that the Navy did not rely on any conduct of
General Dynamics with respect to acceptance of email
orders, but issued the contested delivery orders after nego-
tiations for the fifth option period had fallen through. The
Board found that “CO Lopez admitted that [General Dy-
namics] had nothing to do with his or [the Navy’s] decisions
to send DOs by e-mail.” Board Op. at 10, FF 60. The Board
found that General Dynamics did not possess knowledge
unavailable to the Navy, and that General Dynamics did not
deliberately delay informing the Navy or “conceal[ ] any
prospect that [it] might reject” these Delivery Orders.
Board Op. at 8, FF 50. The Board’s findings are fully in
accord with precedent, and are not fraudulent or arbitrary
or capricious or grossly erroneous or unsupported by sub-
stantial evidence. The Board’s conclusion on the facts and
premises of this case is within its discretionary authority
NAVY v. GENERAL DYNAMICS C4 12
and in accordance with law, and requires affirmance. From
the court’s contrary ruling, I must, respectfully, dissent.